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ACC Tax Form Problem - Rick Smith, Bill Thomas, Diane Asche, and Jill Renteria




Question;Partnership (Form 1065) Fall 2014Rick Smith, Bill Thomas, Diane Asche, and Jill Renteria are equal owners in STAR, LLC a limited liability company engaged in HR consulting. Pertinent information regarding STAR is summarized below.Social security numbers are as follows, Rick 648-98-4321, Bill 48663-4297, Diane 855-21-1750, and Jill 896-49-2341. Rick is theManaging Member of the company.The address of the company is 2835 Bay View Drive, Wilmington, NC26812.The company was organized and began operations on January 1, 2009.The business code is 561900.The federal identification number is 67-1234576The company uses the cash method of accounting and the calendar yearfor reporting.The company claimed $8,119 depreciation for book purposes, but $12,319for tax purposes (under a MACRS methodology). Assume none of thedepreciation creates a tax preference or adjustment for AMTpurposes.All loan borrowings were used exclusively for acquisition of equipment,consequently, all interest is considered business interest.No guaranteed payments were paid to Thomas, Asche, or Renteria, buteach of the four partners withdrew $50,000 as a distribution of operatingprofits. There was no distribution of any non-cash property.The equipment loan is nonrecourse debt to the owners. All initial equitycontributions were paid equally and each individual owns 25% of thepartnership.None of the partners sold any portion of their ownership interests duringthe year.The company has no available tax credits.The companys operations are entirely restricted to the local geographicarea in North Carolina. All owners are U.S. citizens. The company hadno foreign operations, no foreign bank accounts, and no interest in anyforeign trusts. The partnership is not publicly traded.The company is not subject to the consolidated audit procedures. Thecompany files its return in Cincinnati, OH.Rick Smith lives at 572 Knowles Ct., Wilmington, NC 26811, BillThomas lives at 942 Richland Dr., Wilmington, NC 26812, Diane Aschelives at 1342 Coastal Rd., Wilmington, NC 26812, and Jill Renteria livesat 550 Rocker Ave., Wilmington, NC 26812.The companys marketable securities represent small investments (<1%)in a number of publicly traded companies and mutual funds.The company sold its holdings of XYZ Corporation (carried as MarketableSecurities on the balance sheet) on July 10 for $5,000. The partnershippurchased this investment several years ago for $9,000.(The proceeds from this sale are listed as a cash receipt below. Thecompany has no prior-year capital gains or losses.)The current income statement for the company reflected book net income of $ 203,900AFTER book depreciation has been taken on the equipment, and the loss on the sale ofXYZ Mutual Fund. The following information was taken from the corporationsfinancial statements for the current year.Cash Receipts:Fees collectedTaxable qualified dividend incomeTaxable portfolio interest incomeTax Exempt interestProceeds from sale of XYZ Corp. common stockTotal ReceiptsCash Disbursements:Guaranteed payment to Rick SmithDistributions to partners ($50K each)Customer RefundsOffice RentUtilitiesAdministrative employee salariesBusiness & Professional LicensesCash Contribution to United Way (a 50% org.)Meals & Entertainment (100%)Travel (for business)Office supplies & expenseAccounting (Professional) feesAdvertisingTaxes (Payroll, State, Local)Business interest (on equipment loan)Principal payments on equipment loanGeneral Liability Insurance ExpenseEquipment rentalTotal Disbursements$750,0003,6002,4002,600$ 5,000$763,600$120,000200,0003.00026,0006,700305,0002,0001,0003,6007,00010,00010,0007,00028,6004,48115,0003,2005,000757,581Journal entries have been made to record regular (book) depreciation in the amount of$8,119. MACRS tax depreciation was not recorded in the book records.Principal payments against the equipment loan amounted to $15,000 for the year.The balance sheets (book basis) for the company were as follows for the current year:AccountCashTax-exempt securities (at cost)Marketable Securities (at cost)Office furniture & equipmentAccumulated depreciationTotal assetsJanuary 1, 2013$ 86,57652,000120,00065,000(36,576)$ 287,000December 31, 2013$?52,000111,00065,000________?$?Nonrecourse equipment loanCapital Account - RickCapital Account BillCapital Account DianeCapital Account - JillTotal liabilities and capital$ 47,000$ 60,000$ 60,000$ 60,000$ 60,000$ 287,000$?$?$?$?$_______?$?REQUIRED:1. Prepare a Form 1065 for the partnership for 2013 includingForm 4562 and Forms K-1 for each partner. (Do NOT prepare a state return). Preparesupporting schedules as necessary if adequate information is provided. (Hint: If you usea tax software program, you may override the Form 4562 with asset current andaccumulated depreciation entries).


Paper#37774 | Written in 18-Jul-2015

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